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I think that article extrapolates some meaning that isn't exactly what Shulman was saying, part of which was:

"... recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance ..."

I think this isn't so much a witch hunt as it is another attempt to make us into tax police. I see benefit to us in the other goal stated by Shulman if it would improve the overall quality of for-fee tax prep and reduce the # of unqualified, unethical and downright dishonest preparers.

Registering tax preparers and requiring a minimum competency makes sense, said Paul Cinquemani, director of government relations for the National Association of Tax Professionals.

"As complex as the tax law is, believe me it doesn't hurt to raise the bar," Cinquemani said in an interview. "I don't understand how anyone operates without getting education to stay on top of tax law. It's very complex."

Cinquemani said registering tax preparers would enable the IRS to track the ones with problems. He said there are two kinds of preparers who have problems.

"There are the incompetent and there are the unscrupulous," he said. "Some are both."

This is from the original post reference. If this is what the IRS is looking to do, I totally agree. How many times have you seen posts on this site about incompetent and unscrupulous preparers? They need to be weeded out!

I don't think just requiring a basic Block course is sufficient. That is how most of them got out there in the first place. Beyond the basic course they should be required to register with the IRS and do continuing education.

I found this article on the NATP site to be of great interest and answered many of my questions on the focus of the issue.
TESTIMONY BEFORE THE IRS OVERSIGHT BOARD

Read it and if you want to get involved I suggest you email Mr Cinquemani with your comments,concerns and suggestions as to how this can be accomplished.

California and Oregon require all tax preparers to be licnesed, and even so, we often run into unexpected things, like the supposed CPA whose tax returns say "self-prepared" and are not signed...and charged the taxpayer 'way more than I charge.

Most of those are unenrolled preparers who are presently not tied down to any Circular 230 code of ethics - to do anything they want.

The whole purpose behind IRS seeking to require licensing - through a standardized exam - is to clamp down on the unenrolled to at least keep them under some form of professional discipline.
That's why at minimum, the EA designation should be a requirement. And those who refuse to submit to taking the exam, shouldn't be entitled to prepare returns in the first place.

I agree with Fred. This will absolutely drive up prices, modestly I am sure, depending on HOW it is implelented. I would LOVE to see some approach of a basic minimum test for all who work in the field, plus required CPE for all. How about some VERY STIFF provision for those who do NOT sign a return when paid AND similar penalty for those who pay for an unsigned return.

Be careful what you ask for. More regulations only affects those that are inclined to obey the rules. This proposal is much more comprehensive than just dealing with the unenrolled, uneducated, and unlawful preparers. I prefer for the government to enforce the laws that are already on the books than create new laws.

Can't help but note that right here is a classic example of how credentials mean squat. Training in auditing or law does NOT mean that you're able to comprehend tax. Indeed, there's no relationship, so why not test all of us? No one gets a pass makes far more sense. Except for EA's who did have to pass a rigorous tax test. And no, I'm not one. (Yet)

It might not be the objective, but it will be an inevitable consequence. It always is. Maybe it should be. Driving out the dishonest and incompetent will reduce the number of preparers and we can at least hope that the remainder are both honest and competent.

Amazing - such great concern about dishonest and incompetent (have not seen that defined in a tax context) preparers - oh yes, no monetary dreams - only great pain over those that disgrace the competent and gain from the gullible client. Does this passion extend to other areas of life?

I'm not so sure. Practitioners who are dishonest or incompetent run the risk (however small) of removal through the Cir. 230 process. It might be more jarring if there were NO practitioners in those cases.

As to govenment spending...what can one say?

I am not enthralled by the idea of federal licensing for all 2 million (or whatever) unenrolled preparers, as I think I made clear elsewhere on the forum. If it has to be done, I hope someone takes a careful look at the California and Oregon statutes to see what, if anything, works and whether a state-level system of regulation might not be preferable to a federal one.

I'm in CA. The garbage I see makes me ill - of course, California is in such dire straights that spending money for enforcement is NOT a priority. I posted earlier in the year concerning an incredibly bad preparation job on a partnership return; by one of those national chains.

I ass-u-me that those chains have to do the CTEC licensing to practice in CA; if so, it's proof that the licensing without any teeth for enforcement isn't working. When I discussed the baaaaaaaaaaad return with the preparer, the response was "it doesn't really matter, WE have insurance.
My response was that I don't believe that the IRS gives a d*mn about the insurance!

My bet is that the very first response above, Larry's, is on target, both that what they really want is for us to work for them rather than for our clients, and that the actual press release didn't go nearly as far as the articles, and our posts, take it.

But it's fun to speculate, so: if they made everybody get the EA credential, and keep up with the required annual CPE, that might actually have a chance of "protecting the taxpayers" because of the level of ongoing TAX-specific training required, and since Circ 230 would then apply to everybody. But I'd want them to require some minimum amount of supervised experience, too; depending on the quality of the supervisor, that's probably even more valuable than the test prep or test-taking experience. None of that's going to happen.

As much as my inclination might be to let the states handle it, I'm all too aware of the mobility issues faced by CPAs, and would hate to magnify that problem to more preparers. But NMexEA is completely correct that the existing state-wide licensing requirements - and their effectiveness - ought to be examined before anything happens at the federal level. I've read somewhere, probably another discussion here, that you can pretty much pass the CTEC exams after going through a basic class like HRB puts on. That's hardly enough to ensure that you're "protecting the taxpayers," especially if people then try to go it alone with only that level of training.

I am also not an Enrolled Agent who agrees wholeheartely that the tax preparer requirements need to be tougher and if requiring every tax preparer to be licensed will help that happen and to cut down on all of the bad returns that are filed each year, then I'm all for it.

HRB has stepped the way its tax professionals are certified. The upper level classes are much harder then what they were in the past. For our CBT courses we do use the CCH courses and our Instructor led courses are designed pretty much the same way.

I do agree that people who do take the HRB basic course then strikes out on their own with no other continuing training are the kind of people who will either intentionally or unintentionally prepare a fraudlant return. And these are the ones who do not care about integretiy, honesty, and accuracy. And furthermore, this is not type of taxprofessional does not care about protecting the taxpayer.

Gen, not trying to attack HRB here, but you brought them in. Just curious as to the actual process that occurs in the office. I am under the impression that their is no review process that occurs on the tax returns prepared by the preparers. Yes, if a question arises, the preparers are trained to bring those questions to a supervisor, but that doesn't take the place of a review.

I am also not saying that it isn't a good training ground as you do prepare a lot of returns and that gets you ready for the next step.

But, from what I have gathered from here and from experience is that the chains are mass producers and that the preparers give the returns to the client and the return is not reviewed. IMO that is one of the problems out there today.

I have heard that the protocol is to get the returns done and out the door and then if there is an issue, it will get dealt with when the IRS notice arrives.

I do anywhere from 700 to 800 returns a year and once the season kicks in, my primary roll is to review all the returns my preparers prepare. This doesn't mean that I don't make mistakes, cause I do, but it puts another level of protection in their for my clients.

It's with the independent unenrolled that lack the skills in tax preparation knowledge.

In the past three tax seasons I've had TWO completely unrelated new tax clients come to me that had the same preparer prepare their prior year's returns. I saw the same grossly overstated deductions with no merit, self-employed real estate agents where the preparer completely ignored preparing the office-in-home schedule and took those expenses RIGHT ON the Schedule C, picked up charitable donations ON THE SCHEDULE C. In one case, filed an out of state tax return differently than on Federal and home state (HOH instead of MFJ).

Preparers such as this one should be the focus of why it's necessary to have regulation of all preparers and have them submit to a written test.

That's it. I've had it, Uncle. You're barking up the wrong tree. ON THIS THREAD is a CPA! who cannot answer the most fundamental tax questions hardly ever! I am one of those independent unenrolled preparers. The issue is NOT enrolled or certified or NOT, IT IS ONE OF FUNDAMENTAL COMPETENCE, which is NOT HANDED OUT WITH A CPA cert, college degree, or legal creds! Perhaps there is a skewing of incompetence towards the unenrolled, but I wonder. STOP assuming that some intials after a name ensure TAX competence. THEY DO NOT, and we have all the evidence on this board.

JR1, you certainly have more competence in taxation than many with initials behind their names. I completely understand (and agree with) your point that competence isn't conferred at the same time as a certificate.

On the other hand, those with initials and credentials do have to get a certain amount of annual CPE (although the allowable CPE subjects for CPAs don't all have to do with taxation, they do require a higher minimum hours than the EA designation does).

But EAs and CPAs are already licensed, and, as Uncle Sam points out, subject to having their licenses revoked (or other sanctions), so they do have a lot to lose.

Those with no licenses and no CPE requirements don't have as much to lose by turning out shoddy, or even outright fraudulent, work.

Yes, EAs and CPAs make mistakes. I would even venture that Riley2 has made an error or two in his professional life. (we should all be laughing here, as we know that the rest of us make more than two per tax season). But EAs and CPAs have to answer to our licensing boards and/or the OPR. Right now the unenrolled don't have to answer to anyone.

As far as minimum education to be licensed, be aware that the H&R Block basic course DOES prepare a person to handle the most common (although basic) returns of the masses. So I am of the opinion that this type of basic intro course (with examination requirements), plus some type of annual CPE requirement (8 to 16 hours wouldn't seem to be too onerous just to get the 1040 updates and a little review), should be acceptable for those not wishing to pursue their EA or CPA credentials.

There is no doubt in my mind that you would pass the EA exam, JR1. You should do it now before licensing comes anyways. The IRS has stated (or at least received comments) that ....(I just accepted a telephone call and now I'm having a mid-life moment and can't remember my point) (If/when I remember, I'll come back.)

I have to agree with Uncle Sam and Kevin, I don't think anyone stated that EA's or CPA's are better preparers than unenrolled preparers. We do have oversight bodies to answer too though. Knowledge comes from study and from experience. On the other hand, I am proud that I went the CPA route and I use my initials to my advantage. If it makes me "appear" smarter <yes, I know it not be true> than an EA or an unenrolled preparer and that gets me a client, then by heck I'll use that to my advantage. And yes, when I go in to consult with a clinet, I can charge a higher fee because of my credentials. I put my time in. I'll use the fact that there are many many chain franchises that don't give a rat's buttocks about the client to my advantage as well. I'm not jewish, yet I have clients out there who came to me originally because they like having a jewish accountant. Yeah, I'll play that card too if it's dealt to me.

The simple fact that it benefits everyone to have to abide by a certain standard is not bad. By the same token, they have many laws in place now and could use those currently on the books to help weed out the incompetent preparers.

This is US's own words that got me going: "It's with the independent unenrolled that lack the skills in tax preparation knowledge."

Perhaps he didn't mean to brush with that broad a stroke, but what it says is that this is where the problem is, and all the rest have the skills, which is hogwash. If the real trouble is with the HRB-type outfits, then it would be helpful to just say so, but of course, someone will get mail from an attorney. But in this thread, there is a clear linkage between licensing and competence, and it just ain't so. Yes, I do understand that those who are license have the fear of losing it and required CPE to maintain it. But as Kevin says, they don't ever have to take a tax course.

So either break the linkage, and let's just talk about how to control preparers via licensing, or let's talk about how to ensure that all preparers are competent. But don't confuse the issue. Licensing does NOT ensure competence, even remotely, in my opinion.

You are correct with that and I have always stated as such when posting anything similar. In actuality, there are two separate issues. What to do with the independently unenrolled and then what do we do about the preparers who are fraudulent or incompetent.

Two separate issues and from my own greedy standpoint, the harder it is to be licensed means that less will choose to go that route. The harder is the CPA exam, the less that will choose to go that route. The less that go these routes, means more for me. And yes, in FreddyWorld, it is all about me.

I love to hear that you get Jewish clients and never tell. What a hoot! For newer comers, the only reason that I never finalized my creds is that I ended up in Chicago with a degree from Notre Dame. Around here, that was all I needed. And Fred, I'm not Catholic! So we have something in common, letting folks believe what they want.....!

The fact that you haven't felt it necessary to obtain a credential, and reject the notion that licensing = competency is just mere sour grapes on your part.
As Kevin and Fstein have both stated -
Those of us WHO DO have credentials have licensing boards to answer to that can jerk our license if the offense is serious enough. What do you have to lose? You're big mouth?
You're just objectionable to those of us who have made the effort to get licensed so that we're a cut above people like you.

No, that's not it. Sorry I offended. I have been fortunate to not been forced to get a credential all these years, but operate as tho' I do have one and do keep up CPE requirements, etc. This board has indeed been a huge trigger in helping me and many others meet our professional responsibilities. So there's no sour grapes, I know that the EA exam is in my future, and I do frankly want to dodge it since it will be a huge commitment of time and energy, and I'm not as young as I used to be.

I just hate to see the link between licensing and competence. I've already covered that, so won't beat the poor horse. That's my issue. I'd prefer to see something done to ensure competence, and stop giving free passes to those who have no tax knowledge, regardless of credentials. But it's very difficult to object to licensing per se, as a means for someone to have authority over those of us who are running free and wild.

How will the government KNOW if you have tax knowledge or not WITHOUT a standardized, uniformly applied system?
Just taking annual CPEs, and coming to this board for advice doesn't mean you learned anything. It's easy to sign up and pay for a course, but doesn't mean you actually listened or retained anything.
Let me hear your constructive ideas.
NSA has an idea - where it wants IRS to adopt its ACAT test as an acceptable substitute for the SEE exam - so those credentialed under the ACAT system would get an automatic waiver.
The fact that ACAT grants "lifetime experience credit" on its Accountancy exem - where so long as you document years of experience and have a couple of clients vouch for you - one can get credentialed without actually earning it on the merits of the exam.

A lot of my clients struggled to get out of highschool. I can't hold my education over their heads, or they'll consider me an egghead.

No, sir. I try to appear a bit dumber than my clients, and by doing this, a lot of them will pitch in and help me. I've told them over and over again to clip any articles they come by on the tax law to keep me up to speeed.

One of my clients even went and took the EA exam so he could give me a hand in doing his taxes. So, it worked out pretty well.

This law will drive a lot of people into using tax software, for the simple reason that any increases in fees for the low level returns will send them looking for alternatives. I think the economists call that substitution. Then, they'll look to Granny or Momma or Daddy for the "refund anticipation loan".

By the way, this may having nothing to do with complaince issues. The IRS may see licensing as a revenue stream. Congress is putting A LOT of pressure on the IRS to begin covering more and more of it's operating costs.

Something I love about Crow is the easy "ah, shucks" of his posts. Don't kid yourselves, folks. That easy humor comes from absolute self confidence and a secure sense of competence. HE doesn't carry on about credentials; HE is always reasonable and generous and tolerant of all people.

But I know his secret. I know that as a LAWYER he KNOWS he's the ultimate superior breed! (grin)

As I understand it, you can fly the commuter plane with a commercial pilot certificate as second officer. I THINK you have to have an Airline Transport Pilot certificate to be pilot in command and the minimum hours to qualify is 1,500. Could be wrong, though; I'm not myself a pilot. (Maybe after I finish the LL.M.)

Haha. Thanks, NMex. I have some confidence about some areas of the law (not tax), but I must admit that the tax knowledge of the people around here far exceeds mine! It's no contest really.

I've discovered that it's almost impossible for a lawyer to prepare taxes since you attract the absolute worst apples in the barrel: i.e. those who are looking for cover. I don't know if you've run into the same thing or not. So, that leaves representation work, or general business advice.

NMex is correct -- commercial pilot license is a license with training wheels. The ATP is much more strenuous and difficult to pass and the experience requirement is higher.

All the major airlines require (not by regulation) an ATP in order to get hired. The regionals are the minor leagues. Some of the older pilots are very good and highly experienced, but the younger pilots are usually not highly qualified. They learn by watching the guys in the left seat. They trade "legs" of different trips, but under the watchful eye of the pilot in command. When the company thinks the younger pilot is ready, they recommend them for upgrade to PIC.

ATP falls under FAR 121. Commuter pilots often operate under FAR 135 which is less stringent than FAR 121.

I've been out of the business for many years now, but I do recall some of my college classmates getting hired to fly co-pilot (second officer) on commuter airlines with only a commercial pilot license (250 hours minimum time). All the young commuter pilots fly for peanuts and are only building up experience (1,500 hours) to qualify for the ATP and hopefully get hired by a major airline for the big bucks.

Fred, sorry it took so long to get back. I tried to respond earlier this morning but I ended up losing everything I wrote and then I became busy with other work that I had to take care of.

So here it is. Hopefully it will stick this time.

We do review returns. If it's a new client I do look at the returns to make sure they are done correctly and I like to try to look at prior years when that is possible. If, there is other income reported on Line 21, different itemized expenses, if there is a 1099R with any distribution code beside 7. These are just a few of the items that does prompt another more experienced tax pro or office manager to take a look at the return before it's transmitted to the IRS. I will also walk around and see if everything is going well with the tax pro and client. If this is a new tax pro I will look over the return while the client is sitting there to make sure it is being filed correctly.
At least in my district and the surrounding districts we do not do the get them in and out thing. I unfortunately cannot speak for the all of HRB. Just from what I've seen and experienced. I can probably get out a good 15 simple returns in one day. But that is without any other information expect what the client brings in and without a thorough interview. I am one who likes to sit there with the client to get to know the client and look over his paperwork and I will even complete it while the client sits there most of the time. I do not like to feel rushed and my clients like that. I will spend no less than 45 minutes per client and I've even taken as much as 12 hours with a client. I prefer quality over quantity any day of the week. About the “mass producing of returns” from chains; you are right, that is a big problem. I am not going to make excuses for how tax pro's and big chains work. I am just letting you know from my experience. Just like any body else out there, there are great tax pro's that work for Block and sadly to say there are bad tax pro's that work for Block also. Unfortunately, the bad tax pro's gives not only Block but also the individual CPA, EA, and accountant out there a bad name.

Right now I only do about 200 individual returns for myself. When I'm not directly working with a client I am as I said before working directly with other (especially the inexperienced) tax pro's.

Look at the chit chat that went on in the Colgan Air crash in Buffalo -- very unprofessional, and I'm positive it contributed to the "distraction " of stalling the aircraft. He simply lost track of his airspeed as it quickly slowed down when he asked for 15 degrees of flaps.

Gens - you better leave HRB as soon as possible ! ! ! you are giving them a good name :-)
You sound like someone I'd like to have working for me - where are you? I'm going to need someone next tax season with your level of experience!

Big difference between incompetent tax preparers and incompetent airline pilots - no one has died (yet) from the mistakes I've made on returns over the years.

Back to US's question: "HOW do you ensure competence WITHOUT a written exam?" (And thank you, Kevin...) I didn't mean to suggest that there shouldn't be one, necessarily. If we're just talking out loud here, I guess the first question is what is trying to be accomplished. Is it proof of competency, licensure, or both?

If it's merely licensure, so that IRS has authority to suspend practice, why can't all paid preparers automatically be under Cir. 230? I was frankly amazed when I first learned that 230 didn't apply to me. How could that be? So is there something that prevents that? And if that could be accomplished, then IRS has the power to suspend preparers easily, I would think.

Barring that possibility, and if licensure is what we're after, then yes, some fundamental test that's well short of an EA exam would do the job. I'm not sure how to ensure that there isn't fraud involved in taking them. But I would NOT try to sell the public that this provides any assurance of competency.

If we're after competency, or both that and licensing the unlicensed otherwise, then requiring some sort of EA-type exam is the only thing that makes sense. Perhaps there could still be an EA-lite that might fall short of full privileges of an EA, but again, to me, all preparers who are not already enrolled, (or ACAT, I agree, that process is similar except for the lifetime exemption) should have to pass it...tho' we need to be kind enough to allow a few years for everyone to pass.

I also see the point that a tax pro (for the argument, let's say one with credentials and years of experience) who only prepares large corporate or estate returns might not be competent to prepare a basic 1040 with EITC.

Should the public be able to find out his competencies?

Should he have to take an exam to prove his competencies should he wish to start preparing 1040s?

The purpose of the EA exam, (and its new diminutive cousin, the ERPA exam), is not to qualify return preparers. It isn't designed to do that and it doesn't do that. The EA program is intended to qualify taxpayer representatives.

If you want an example of what a genuine preparer's exam might look like, visit the State of Oregon's tax professional license board web site. The Oregon exam is largely devoted to the mechanics of and rules governing individual return preparation. And it should be noted that even EAs are required to take the state law part of the Oregon exam in order to prepare returns in Oregon. Only Oregon licensed CPAs and lawyers are exempt.

Nice Gen, real nice. And you should understand that while I stated things n broad strokes in regards to the chain chop shops, there are definitely ones out there that due do their due diligence. It all depends on the owners. In fact, the one that is in my town is one of the better ones. She has owned it for 20+ years and has had the same preparers for many years as well. I actually view her more as an accounting firm than an HRB shop. Sorry, the few bad apples happen to be more than a few and they give you good ones a pretty poor name.

The simple fact that you are on here and contributing and using this place as a means to enhance your franchise shows that you are not at that chop shop level.

I am curious tho to know what corporates true philosophy is as handed down to the franchises. Not so much in what is writeen, but in what they really want them to do.

Thank you very much for the compliment Fred. I am not a franchise. I actually work for in a company owned office. And yes, I do understand all to well what everyone is saying. Eventhough I am not an EA, CPA, or an accountant, I can understand quite well why everyone here is so fustrated. Believe me I am fustrated as all of you and I believe more so than you might know. I have had my fustrations withs clients coming in that went to a CPA and the CPA messed up royally.

Like I said above I am not a franchise, I will never dream of being a franchise owner. I am too afraid besides having lack of money to venture out on my own. I fear that I might get the educational courses that I need.

As far as what corporates true pholosophy is as handed down to the franchises. I have no idea whatsoever.

I would be honor to be able to work with no, for some of you guys in the future, to further my knoweldge. I know for a fact that I can learn all I need to and want to about corp's, gift tax, and any and every other type of tax filing there is besides individual. Non-Individual returns are my weakest area. I actually know more about Circular 230 then I do about partnerships, S-corps, C-corps, well you get what I'm saying. For me learning is not just about reading the code, doing the CPE courses, it's also hands on. And most of my learning after read everything is the hands on. Just because I read it does not mean I am understanding it fully or even correctly. It's only after I get into the return that I really start to learn and can see how such and such applies to such and such.

I am ghad that Blocks courses are tougher. And because of the changes that they made to be certified I went from Tax Advisor III down to a Tax Advisor I. For me to jump up the two levels so I can be certified again as a TAx Advisor III I really have to take quite a bit more classes. And I've already done at least 45 hours so far. We now not only have test for each of the courses that we take (like before) but we now have to take an assessment test for the desired level that we want to be certified in and if we fail the test on the third try we cannot retake the test till the following year and we cannot skip certification levels either. Which I like. It's tougher but I like that. All-in-All Block is working on getting back to the basics instead of trying to "sell" "sell" "sell".

I hope I made some kind of sense here in my rambling.

Thank you all very much for listening and giving me feed back. Especially when I am wrong or mistaken about something. I might not want to hear but I do need to hear it.

So, do me a favor. NEVER EVER hold back no matter how bad or stupid my answer or question may seem to be. And I know none of you will hold back, because ya'll don't.

Gross $8,500 in revenues and deduct 15K for a Hummer to impress your clients. I wonder if this "Tax Doctor" gave his clients a case of Swine Flu. Note that originally Mr. Symonette filed as a single person.

Thank you so much Belle. I really do appreciate the compliment. I have a tax pro or two says I'm the best. I have to remind everybody that I am not the best. I am good but not the best. I may keep that commute in mind. But I really don't think none of my clients who have appointments scheduled already will like that idea. Some of them will follow me and hunt me down no matter where I go. But I can guarantee that they will not like the idea of me commuting so far away. Maybe when I take my 8 weeks I'll come on up and visit. If not this summer maybe next summer.

In my humble opinion, licensing prepares is a mistake. It fact it’s symptomatic of the warped thinking that got us in into the current bailout mess.

We have no shortage of regulations. More regulations will only create more government bureaucracy place more burden on those who are already overburdened with regulations. The people who are ignoring the current regulations will simply ignore the new regulations.

There are more elegant solutions to this problem that would achieve the same effect with much less government bureaucracy. For example before granting ERO e-file authorization, make all UNlicensed preparers provide proof that they have obtained: (1) a performance bond equal to the greater of $1,000,000.00 per firm or $50,000.00 per preparer and (2) a PREpaid a 5 year $1,000,000.00 per preparer Errors and Omission insurance policy per preparer (cannot be a group policy that that covers all employees, must be an individual nontransferable policy).

Is this a perfect solution? No, but it would probably clean-up most of the garbage.

How to clean up self prepared returns:

In order to activate the tax software, you would be required to register your software with a vendor and obtain a unique Customer Number. In order for the IRS to process the paper return the Customer Number must appear in the signature area for self-prepared returns. So if I go out and purchase Turbo Tax and Prepare 100 returns my Customer Number would appear on every return. It would be very obvious to the IRS all of these returns were not self prepared.

Is this a perfect solution? No, but it would probably clean-up most of the garbage.

You can be unlicensed, but you need to have some skin in the game and the government would know how to find you and send you to jail. Basically, it would level the playing field between licensed and licensed preparers without creating a huge government bureaucracy and enforcement nightmare. Both licensed and unlicensed preparers would have something to loose if they break the rules of the game.

It would be chump change for the franchises. The dollar amounts may need to be tweaked.

We could also talk about grandfathering current unlicensed preparers. If you’ve been in business X years and prepared Y number of returns per year the compliance requirements could be reduced.

Yes workload would go up, but fairly between licensed and the unlicensed preparers who meet the standard.

The use of the e-file authorization is an excellent idea though I am not sure bonding is the best way. The reason using efile works is that many of the unscrupulous store front operators rely on the speed of efile to transmit the EIC returns and collect their money quickly while their clients are happy with the RAL money. But a one man band only need bond himself for 50K.

As for requiring E & O, insurance is not going to pay the taxpayer for the taxes owed. It might have the perverse effect that any kind of malpractice insurance has in that who would fight a penalty if insurance covers it? But the taxpayer is stuck with the tax bill, and for many, perhaps they deserve it for flocking to the seasonal store front [I do not mean HRB, Liberty etc] because the man inside gets big refunds for them.

And driving out so-called professionals who use Turbo Tax is a great idea. Might even catch a few lettered people.

I purchased a practice from a guy about 12 years ago and he was still deducting sales tax on Sch A (he prepared returns manually), even though he had done taxes for 45 years, he didn't see the need to get any license or take any CPE. Or appparantly read the instructions each year to see what had changed.

The simplest issue is probably to just find a way to bring all paid preparers under Cir. 230, which gives IRS the hammer that they need. We already have stringent ERO requirements, except, of course, well, never mind. Those two things are about all the gov't needs, along with enforcement, to knock out the shady and incompetent.

I think that licensing, unfortunately, is the only way to hold the Cir. 230 hammer over everyone equally. The state accountancy board has the same problem -- people can do poor tax or accounting work and not be held accountable because only licensed CPAs fall under their jurisdiction.

We need the same union that the attorneys belong to -- you can't practice law without a license, period.

Regardless of whether licensing is adopted, some way is needed to make individual taxpayers aware that THEY are liable for any problems related to a return that is NOT signed by a preparer.

I would like to see a separate form that the taxpayer needs to sign attesting to the fact that he/she understands that, AND understands that if he/she pays a preparer, the preparer is legally required to sign the return, AND that the TP and the preparer may both be subject to sanctions for willful disregard of these rules.

Turbo Tax is the Devil. I had to prepare a 1040X last week for my brother-in-law to correct all the errors on his self-prepared, "free" Turbo Tax return.

Question: Would a blanket E&O Requirement eliminate the market for lemons or actually lead to adverse selection? If every tax preparer must obtain E&O, will the insurers merely assume that we're all average quality preparers and charge all of us accordingly? CPAs have the luxury of the AICPA group plan where rates are based on a pool of CPAs; however, other highly competent, non-CPA professionals could end up subsidizing the risk created when Turbo Tax firms are mandated into the risk pool.

Just my rambling thoughts. Anyone agree or disagree?

FYI - for any CPAs not yet participating in the AICPA Life/Umbrella/E&O/etc, it's a great deal and worth your time to review.

Yeah, I don't know that requiring insurance accomplishes much other than enrich the otherwise messed up already insurance industry. And you've hit the whole nail on the head...the fallacy that any org really does much to discipline its members is wishful thinking. Like catching drunk drivers, to get caught, they've been doing it for YEARS. To get disbarred/removed, etc. you've got to be so flagrantly bad.

Again, what's the purpose? If it's to ensure accurate filings, it won't work no matter what, since everyone with TT will still be more dangerous than the worst tax 'pro'. If it's to assure the public somehow, again, unless you're testing every practitioner regardless of letters, then that doesn't work either.

But I do think bringing everyone under 230 at least gives the gov the authority that might now otherwise have, and that makes sense. But let's not pretend that it's much more than that.

Proponents of central regulation often point to the idea of the government acting as a "quality assurance agent" for the collective. This makes sense with things like FDA regulation of drugs. Economist refer to goods, such as drugs, as "credence goods" - these are goods/services the quality and utility of which the consumer cannot ascertain on his own (although there are exceptions, think Viagra). This is where licensing comes into play in our field. Sure, there will always be shady CPAs just like there will always be highly competent preparers with no fancy letters. The key issue is whether a licensing program - mandated and administered by a government bureaucracy - will really provide quality assurance to the consumer-taxpayer? I think not. As you said, this is more about establishing government authority than it is protecting innocent taxpayers.

Out of curiosity since I'm still new at this game, how do the so-called "pros" who use TurboTax or one of its clones e-file all of those returns? I thought TT limited you to 5 returns or so. Unless they mail them all...

If a CPA were to move to Oregon he/she might be in a tougher spot than an EA. He would have to be re-licensed (CPA) through another CPA exam in Oregon. If he wanted to limit his practice to tax work his CPA (Not valid in Oregon) would force him to take the entire Oregon tax exam. Whereas the EA would simply (or maybe not so simply) be required to take the state portion.

It's strange, alright. But the pass rate for the EA "state only" Oregon exam runs about 75%. The EA tax practitioner coming in to Oregon who passes the exam also gets a nice bennie; he can represent taxpayers before the Oregon DoR and in the magistrate divid=sion of the Oregon Tax Court.

Bennie, not beanie. (grin) So life is easier for an incoming CPA than for an incoming EA if the CPA meets all the requirements. But I lokked at the Oregon state law exam...it doesn't look terribly difficult.

Funny thing, that...if you want to be a Licensed Tax Consultant in Oregon, you have to take a fairly nasty State and Federal exam with about a 55% pass rate, prove up 80 hours of training and a H.S. Diploma and show two full-time tax seasons worth of work experience. Unless, that is, you are an EA.

If you are an EA, which you get by passing the SEE and character check, you need have no education or training, no experience, and no H.S. Diploma. You just pass a 90 minute exam with a 75% pass rate.

Yet the vast majority of Oregon LTC applicants take the non-EA route. WHY??

It is pretty academic to me thus far. I don't plan to practice in Oregon. Nmex you did your homework and have presented us with a pretty good snapshot of how it works in Oregon.

In a different vein: Attorneys, CPA's and Enrolled Agents are "Enrolled". Do the attorneys and CPAs have to abide by the same educational requirements as spelled out in Circular 230? A CPA has to meet education requirments to maintain the certificate but they don't necessarily have to be in the area of income taxes.

So in a nutshell does their status as CPAs and/or attorneys qualify them to be enrolled with no regard to the same educational course work required of the Enrolled Agent?

The National Society of Accountants (NSA) has a state by state analysis of what is required in each state regarding licensing, rules of practice, continuing education requirements, for CPAs and Enrolled Agents.

If you're interested only in Enrolled Agents' status, then I suggest you contact NAEA.

I'm really just asking about the circular 230 requirements. Would an attorney or CPA have to maintain the same continuing education requirements? Or would simply being a a lawyer or CPA qualify you to be "enrolled"? Would a attorney not be required to have any course work in taxation? It would seem that these requirements would lie outside what each individual state dictated and would be captured by the general requirements of circular 230.

All Circular 230 licensees are subject to the same requirements. However, since an EA license is Federal, and CPA and Attorney are state, if the licensing state has higher or more stringent standards - that takes precedence.

A CPA must meet the CPE requirements of his state of licensure. An attorney must meet CLE requirements, if any, as imposed by the state Supreme Court that granted her admission to the Bar. Cir. 230 imposes NO CPE or CLE requirements on either practitioner.

Attorneys and CPAs do not receive enrollment to practice before the IRS. Their practice privilege comes with their state licenses. Indeed, decades ago, attorneys and CPAs were not eligible for enrollment.

This has an interesting consequence...it is entirely possible to be represented before the IRS by a practitioner who has NEVER taken a SINGLE tax related CPE/CLE credit in his entire life! In the case of an attorney, she may ALSO never have taken a single course in taxation in law school. I understand that some CPAs have taken but a single tax course which is almost as bad.

Sorry to butt into the conversation, but I am a producer over at Fox 5 News in Atlanta. I'm working on a story right now concerning some of the Tax Relief companies you see advertise on TV claiming they can save you pennies on the dollar and you only have ONE chance to settle your IRS debt.

Specifically, I am looking into some of these LA-based companies such as:

All these companies and a few more are all located within 15,000 feet of each other! I'm not sure if there is a reason why that is. The BBB gives all these companies F's and they seem to operate off a "Churn-and-Burn" business model where they push for an OIC and don't actually follow through.

I'm not sure if this is the best place to post, but I've read all your replies and you are the best group I've seen anywhere.

I guess some of the questions I'm looking to see is do these Tax Relief companies have to be licensed. I know there is a difference between the relief agencies and a preparer, but I'm wondering if any of them fall under Circ 230 or any California laws (Maybe CTEC?). I'm just wondering why the mecca seems to be in the greater LA area. I know the whole debt relief and loan modification scams started there as well, so I'm wondering if maybe that had something to do with it.

We have quite a few people here in Georgia that have been burned by these companies, and the BBB says that most of the complaints come from out of state since you can't really sue them in Georgia Civil court because they don't have a physical presence there and it's not worth flying to California for a 3,000 suit.

Any lawsuits that have come so far are only concerning advertising from the companies, not regulation on them.

Anyway, if anyone could help shed some light on the situation, I would appreciate whatever help I can get. Swimming through Tax Code is damn near impossible for me as I see numbers and just shut off.

If you want, send me an email at andythomaskelly@gmail.com or my direct line at Fox is 404-724-4489

Thanks for any help,

Andy

(Also, if I've completely mucked up and posted in the wrong section, tell me here, and I'll delete it and get out of your hair. I don't want to step on anyone's toes, but you all seem like a great, knowledgeable group of people)

Andy - May I have the privilege of being the FIRST TaxAlmanacer to officially WELCOME you to this board. You are welcome to come and learn a lot about the tax practitioner world that you may not be aware of.

As I am the most critical of non-practitioners' participation on this board - because of lay members of the public seeking free advice without us receiving adequate information to work with to provide tax advice, do-it-yourselfers looking for us to walk them through a problem (when we get paid for that), this must be a first for me - where a news reporter tunes in to provide some input. So - you are free to participate in our discussions and learn from our lifetime experiences.
From my perspective, the people who run these TV Tax Relief Mills, are mostly ex-IRS employees now earning a living from working on the other side using their inside information supposedly for clients' interests. Also, they are professionals (Attorneys and CPAs) who have specialized in this line of work because the fee billing is higher due to the specialized service. But to my knowledge, they are not specifically required by state law to possess a professional license to be in this business. It helps to have one, but not necessarily required.

To my understanding, if someone goes to represent an individual in front of the IRS, they must be an Attorney, EA, or CPA.

We've done a few interviews with people that have been burned by these companies in Georgia, and I've very interested.

It seems that the companies are not regulated at all, and can't really lose their liscence (if they are even liscences at all) for any problems.

It looks to be more unethical than illegal. Most of these companies are only talking to the client for a few minutes (if that) and then coming out with a charge claiming they can stop any liens and prevent the IRS from taking action. Most of the time, they are pushing the OIC and once they split the client from the money, virtually nothing gets done.

A rep from the BBB told me he speculated that any success stories that you see are because the companies just got lucky and someone called them that would have had the OIC accepted anyway.

Why are the companies charging ahead of time? Credit Score companies that repair your score only charge after it is done. It seems like a completely shady business (and a good story)

They run national ads and target desperate people. Mind you, most of the time, if you just google the name, the customer should know not to mess with them, but not everyone does that.

The contracts they get into say the company will only "try", so there really isn't much legal ground that can be made since all it takes is for the relief company to submit an OIC (even if they know it won't ever get accepted) and then stop. It puts them out only $150 if my notes are correct for the OIC.

Now don't get me wrong. I've found examples of plenty of good tax relief companies that do not make as much money because they will tell a client that they have no chance for an OIC from the get go (which takes talking to the client for more than 2 minutes).

The predominance of the bad tax relief agencies (F ratings with the BBB) are all located in the Los Angeles area.

Thanks for the response, I'll see if I can do some more research and formulate some clear questions (I know I'm way to stream-of-coinscienceness right now), but any info that you have or any leads you can point me towards, I would be much obliged. (Especially anything law related). I'm a total dunce.

Let me explain one concern you raised, then I'll provide you with a contact - someone who specializes in rep work who doesn't come from the TV chains - maybe he can explain it further for you.

With respect to taking advance fees - it is customary in this type of work - which is risky, highly specialized in nature, due to a time delinquency over an extended period of time due to uncontrollable circumstances - to require compensation in advance to prepare the necessary and required paperwork to prepare for IRS correspondence. In other words - to be compensated for lost time - "to catch up". How these firms utilize their resources is a whole other matter. But it is not uncommon to request advance payment.

Now - a man named Marc Dombrowski from Buffalo, New York who heads Tax Help Associates, specializes in representation work (Not a national TV chain). He has spoken at many state society of Enrolled Agents conventions on tax rep issues. If you'd like I'll get his contact information and report back here. Better yet- I'll give him your contact info.

I don't do rep work so I can't really educate you on this service. But I'm sure others on this board can give you some input.

I don't do this stuff, either, but a few folks around here do. I wonder how many of the success stories are from five years ago and before? I bet most, if not all. Up until then, almost any offer was accepted, as amazing as it sounds. I saw some work with the IRS direct and get some of those dimes on a dollar deals done. But nothing anywhere near that in the past few years. There's a newer system in place that really precludes it, including, as I recall, review by the counsel's office of any deals over 5 grand....

Uncle Sam: I appreciate the offer, but I'm not sure if I can use your friend. It would probably represent a conflict of interest if he does tax relief as well (can't promote someone while bashing someone else).

I guess I'd be looking more for retired-IRS agent that hasn't signed on with someone else so they are free to speak their mind, but feel free to give him my info, it wouldn't hurt to talk on background.

I'm still at a loss as to why most of these companies are located so close to each other in LA. I suppose it could be a coinscience, but I've started losing my faith in that.

Andy, give me their addresses and I'll go check them out. I'm here in LA this week teaching for the California Society of Enrolled Agent's annual meeting. I've got an afternoon off tomorrow and Friday (I still have a 2nd home in East Cobb o.ff of Johnson Ferry Rd, but sold my practice in Georgia 5 years ago and moved to North Carolina. So anyways, I'm a viewer when I'm at the Marietta home.))

But like I said, even being a CPA doesn't seem to be a guarantee of breathtaking tax expertise.

The National Association of Enrolled Agents (of which I am a member) likes to claim that enrolled agents are THE tax professionals because we have demonstrated special competence in tax matters (which is a quote from the Regulations). I beg to differ...I am an attorney and an enrolled agent and I wouldn't trust me to file for an automatic extension!

AndyTK,

You don't really have to be an attorney/CPA/EA to advise a taxpayer about an offer in compromise. You need to be a Cir. 230 practitioner to actually represent the client in his absence before the IRS. Anyone can give tax advice and everyone (it seems) does.

I have read a good bit around the web about "former IRS employees" bilking the public. I wonder if that isn't a bum rap. A former IRS employee with at least five years of IRS experience interpreting the Code and Regulations is eligible for enrollment without having to pass the Special Enrollment Examination. I can think of no reason to believe that this group of EAs would be any less ethical or professionally competent than those of us who took the SEE.

You might have been the earlier post that said the Enrolled Agent was really intended to serve as a taxpayer representative and not in fact a tax preparation expert. I meet more and more EAs here in Kentucky who do not want to do tax returns but prefer to represent. One told me when you represent you can focus on the problem after the fact. If you prepare you are at least part of the problem and might end up being most of it.

The fact an attorney need not have taken a single tax class is irrelevant. Attorneys are prohibited from representing clients unless they have the requisite knowledge to compentently conduct that representation. In every jurisdiction the violation of this requirement will subject the attorney to discipline. In the ABA model rules for example, this is no less than Rule 1.1.

And you've never seen a lawyer undertake a matter for which he was not only unprepared but unaware of the extent of his own lack of preparation? That's the point I'm making. Neither the IRS nor the Tax Court checks a lawyer's qualifications beyond possession of an active law license.

Where'd you get your LL.M.? I've just finished the first trimester with Taft Law School. The degree won't help me find a job but I am learning a lot.

And my point is what difference does it make whether anyone checks to see if an attorney has tax qualifications? If an attorney is going to rob a bank or practice tax law when he can't tell a levy from a lien he bears the risk of that conduct. In California, where the State Bar has its own investigators, prosecutors and judges just for attorneys, this risk can be substantial.

Oh! Well, live and learn. I saw that you are a CalBar tax specialist...somehow that made me think "LL.M." Stupid of me.

As far as the lawyer bearing the risk, the trouble with that is the CLIENT also bears the risk, and usually suffers first. Really, taken to an extreme, your argument would obviate the need for a law degree or bar exam; any "lawyer" who undertakes a matter he's not competent to handle takes that risk, right?

Please don't think that I think that you are suggesting any such thing. I merely wish to point out that there's an element of consumer protection here.

NMexEA, the CA specialist rating is difficult, with CLE requirements, a second bar exam covering only taxation law, and peer reviews, but well worth the distinction. I am one of those lawyers who never took a single tax class in law school. When I developed my interest in tax after the bar(and after twenty three years as a street cop), I took my initial training like so many others, from HRB. My representation skills were learned not from other attorneys (except Bob McKenzie), but from EAs with four straight years of NTPI through NAEA. This is why I have so much respect for the EA profession. They gave me a thorough grounding in representation. Then I sat in as second chair (a flunkie attorney to the actual counsel of record) on almost forty tax court trials watching, questioning witnesses, and learning (as a volunteer). No published credit but an excellent education.

I can see both sides of the debate about licensing and would like to simply clarify one point. Several times "fraud" was brought up, e.g., people who do take the HRB basic course then strikes (sic) out on their own with no other continuing training are the kind of people who will either intentionally or unintentionally prepare a fraudlant (sic) return. Fraud involves intent. No intent, no fraud.

Regulation/testing and regular CPE may help preparers reduce mistakes. Those who are committing fraud, however, are likely to continue unless there is some method to penalize them, and those penalties are actually handed out. I like the idea of holding all tax preparers to the standards in Circular 230.

Any information you find would be great. Still looking to see if there are any connections between them or why all these Tax Relief companies (All with F's) are located in the greater LA area.

NeMexEA, All I meant was that I'm looking for someone in the Atlanta area willing to go on camera about them. I've found a few, but most people are in the tax relief business, and it might be more of a conflict of interest there. The ex-IRS thing was more trying to find someone that could talk about these companies without having to worry about competition. I didn't mean to say they would be more or less ethical over someone who took the SEE.

Although, one thing I am wondering about is whether or not Tax Preparers like these relief agencies. It doesn't seem fair that you have to be regulated, while they don't (or I guess they can have at least one EA, Attorney, or CPA that would represt the client if they even do go in front of the IRS).